You can see that the bearish pundits on retail are paying the price now. The rally in the retailers is a surprise, given that the numbers are simply OK. But the shorts must have been set up and the chronic disappointers like Costco (COST - commentary - Trade Now) are rocking the short world.
A rally led by retail is a sight for sore eyes for several reasons. Let's detail them:
We weren't supposed to have a back-to-school season this year. The Wall Street Journal and The New York Times have written that story half a dozen times, including an absolute travesty of a series written in the first week of July!
Back-to-school season is late because of a late Labor Day, and yet we are already getting decent numbers.
Unemployment is so high vs. last year, and it has only knocked off a couple of points, especially when you consider that last year was pumped by stimulus checks.
The rally is across-the-board and not driven by tradedowns. Ross Stores (ROST - commentary - Trade Now) and Limited (LTD - commentary - Trade Now) are great, but so is Coach (COH - commentary - Trade Now) and Tiffany (TIF - commentary - Trade Now) and especially Nordstrom (JWN - commentary - Trade Now), a sure sign of strength in the once-massively-depressed California. Remember, California's a fifth of this country. Kohl's had double-digit comps in California, which is nothing short of amazing given the endless talk of a California depression. Again, I attribute that to the massive housing turnover that comes with the bottom.
The consumer is supposed to be pulling in horns and saving less. But that's not the case if you look at these numbers.
The wealth effect is obviously stronger than we thought, with the stock market helping and the housing bottom that no one believes in kicking in, meaning that there are new purchases to go with all of the houses being bought (not built, as I commented on in the Hovnanian (HOV - commentary - Trade Now) piece on flagship.)
I could detail many more items and could speculate on how much of this rally is short-covering in the myriad ETFs. Suffice it to say that the bears need this group to be down, because it is a sign that the consumer -- two-thirds of the economy -- is alive, well, and spending, ruining a very good negative thesis.
Random musings: Ciena's (CIEN - commentary - Trade Now) strength is directly related to the Mobile Internet Tsunami, and I think it will go higher. ... Gold's strength I am taking, besides the sign of a dollar that will weaken, as a belief that business isn't so bad...
At the time of publication, Cramer had no positions in the stocks mentioned.
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Jim Cramer Blog Staying on Defense 9/3/2009 11:05 AM EDT This is a good time to lock in some gains on aggressive stocks.
Jim Cramer Blog Not Too Late to Sell 9/1/2009 5:50 PM EDT The rally hasn't been a sham, but a bigger pullback would be reasonable.
Jim Cramer Blog Look for More Selling 9/3/2009 8:44 AM EDT I don't believe the action in China is enough to quiet the rumblings from other areas of the market.
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